The following is an extract from the Department of Families, Community Services and Indigenous Affairs annual report 2005-06, ORAC contributed to reporting against output group 6.2: Services for Indigenous Australians.

The full FaCSIA annual report 2005–06 can be seen on FaCSIA's website.

Extract from FaCSIA annual report 2005–06:

Performance reporting

Output Group 6.2: Services for Indigenous Australians

Contribution to Outcome 6

Services to Indigenous Australians contributes to Outcome 6 by delivering services aimed at accepting and recognising the collective rights of Aboriginal and Torres Strait Islander people as original custodians of Australia, promoting the repatriation and reconciliation programs and administering the Aboriginal Councils and Associations Act 1976.

Strategies

Incorporation, regulation and building capacity of Indigenous corporations

support the delivery of incorporation, regulation and related services for Indigenous people in accordance with the Aboriginal Councils and Associations Act 1976
undertake this work in a manner consistent with the special needs, requirements and risks of Indigenous corporations and within the context of current and emerging Australian and international law and practice on sound corporate governance.

Outputs under Output Group 6.2

Incorporation, regulation and building capacity of Indigenous corporations

The Registrar of Aboriginal Corporations is a statutory officer appointed under the Aboriginal Councils and Associations Act 1976 (ACA Act) with 40 departmental staff at 30 June 2006. The Office of the Registrar of Aboriginal Corporations (ORAC) delivers incorporation, regulation and related services to Indigenous people in accordance with the ACA Act.

ORAC performs its work in a way that takes account of the special needs, requirements and risks of Indigenous corporations, consistent with the races power of the Australian Constitution and the Racial Discrimination Act 1975. It also performs its functions within the context of Australian and international best practice on sound corporate governance.

ORAC’s regulation work is coupled with delivering a suite of responses, such as a unique online Public Register of Indigenous Corporations, a complaints and information line on Indigenous corporations and workshops and accredited training in corporate governance to improve the practices of Indigenous corporations especially those in remote areas.

The Minister introduced the Corporations (Aboriginal and Torres Strait Islander) Bill 2005 into the Australian Parliament on 23 June last year. The Bill affects all corporations registered with ORAC, and will start on 1 July 2007 if passed by parliament.

The Bill is currently being examined by the Senate’s Legal and Constitutional Committee, which is expected to report soon. A transitional Bill—the Corporations (Aboriginal and Torres Strait Islander) Miscellaneous and Transitionals Bill—is being drafted to deal with all the practical difficulties for corporations transferring from the old ACA Act to the new law.

Advantages for Indigenous corporations under the proposed new legislation include:

less reporting for most corporations
earlier intervention by the registrar to prevent corporations failing
a new register to record people disqualified from managing a corporation
extending directors’ duties to senior managers to ensure they act in a corporation’s best interests
confirming that ORAC will provide support and training to help corporations succeed.

Performance summary for Output Group 6.2

Key achievements included:

Incorporation, regulation and building capacity of Indigenous corporations

overseeing a total of 2,529 corporations registered under the Aboriginal Councils and Associations Act 1976 at the end of 2005–06, a targeted reduction of nearly 2 per cent in corporation numbers
achieving ORAC’s highest compliance result with some 46 per cent of corporations compliant
under the ACA Act for 2004–05
achieving very positive findings following a review of ORAC’s training in corporate governance
actively regulating corporations to avoid corporate failure, including 49 examinations (good governance audits)
progressing the Corporations (Aboriginal and Torres Strait Islander) Bill 2005.

Work is required to:

Incorporation, regulation and building capacity of Indigenous corporations

increasing the compliance of corporations
extending the Office of the Registrar of Aboriginal Corporations (ORAC) training further into remote regions, targeting women, young people and senior staff
preparing for the commencement of the Corporations (Aboriginal and Torres Strait Islander) Bill on 1 July 2007, including the register of disqualified directors
developing a specialist recruitment service to support Indigenous corporations.

Performance information

Departmental outputs

Incorporation, regulation and building capacity of Indigenous corporations

Quantity

Number of corporations incorporated under the Aboriginal Councils and Associations (ACA) Act 1976
Target: 2,500.

At 30 June 2006, 2,529 corporations were registered under the ACA Act. This is a targeted reduction of 2 per cent in line with an emphasis on ‘responsible and necessary incorporation’. After rapid growth in Indigenous corporations under the ACA Act in the early 1990s, the number of incorporations annually remained steady for some years and has now started to decline (see figure 1 and table 1). It is estimated that at least as many Indigenous corporations are incorporated under other legislation. However, some of these corporations are interested in transferring to ORAC when the new Corporations (Aboriginal and Torres Strait Islander) Bill commences, to gain the benefits of ORAC’s support and preventative work.

Figure 2.14 | Registered and new corporations, by year, 1988-89 to 2005–06

Corporations functions are diverse, from providing services such as health care and power supply to simply holding land. Many corporations are multifunctional.

Most groups incorporated under the ACA Act are located in remote areas and are publicly funded. However, some generate substantial private income—for example, corporations linked to mining compensation or to the Indigenous arts industry. Many hold significant community assets that were funded publicly and are now held privately by the corporations. See figure 2.15 and table 2.52 for the number of corporations, by income and assets, at 30 June 2006.

Table 2.51 | No. of registered and new corporations
	No. of registered corporations	No. of new incorporations finalised
1988–89	843	180
1989–90	1,024	181
1990–91	1,244	220
1991–92	1,474	230
1992–93	1,772	298
1993–94	2,076	304
1994–95	2,389	313
1995–96	2,654	265
1996–97	2,816	162
1997–98	2,999	183
1998–99	2,853	128
1999–00	2,703	183
2000–01	2,709	171
2001–02	2,783	187
2002–03	2,861	183
2003–04	2,713	134
2004–05	2,585	120
2005–06	2,529	102

Figure 2.15 | Number of registered corporations by income and assets at 30 June 2006

Table 2.52 | Number of corporations by income and assets at 30 June 2006
Assets	‹$25,000	$25–50,000	$50–100,000	$100–500,000	›$500,000	Total
Income ‹100,000	40	17	13	22	17	109
Income 100–500,000	6	11	15	83	44	159
Income ›500,000	0	0	1	50	218	269
TOTALS	46	28	29	155	279	537

Notes:
1. Income = total grant plus other income. Assets = total of current plus non-current.
2. Income and assets are for the financial year 1 July 2004 to 30 June 2005.
3. Annual reports for 2005–06 are not due until 1 October 2006.

Quantity

Number of days of non-accredited training in corporate governance
Target: 70.

The ORAC training team consolidated its program of training in Queensland during 2005–06 and began adapting the three-day workshop and Certificate IV in Business (Governance) for use in more remote areas where most of ORAC’s corporations are located. Training is based on ORAC’s commitment to improve the sustainability of corporations and is undertaken using a tailored training method and materials. The training complements rather than duplicates mainstream programs and is offered to targeted high need localities and groups around Australia. The Certificate IV in Business (Governance) is increasingly being run independently of ORAC through some TAFE and private registered training organisations, and ORAC shares its materials with other providers.

An essential part of ORAC’s incorporation work is providing information and assistance to groups before they incorporate and after they have incorporated. ORAC also helps corporations to manage disputes, although it does not act as a mediator.

ORAC’s 2005–06 target of 70 days of non-accredited training has been exceeded, providing a total of 88 days of training and information sessions made up of:

sixty-seven days of information sessions, consisting of one-day and half-day sessions, attended by 992 participants, primarily covering urgent or pre-incorporation corporate governance issues
seven three-day introductory corporate governance workshops, including a remote workshop (that is, 21 days in total). ORAC’s three-day workshops were attended by 127 participants and provide board members, senior staff and members with key corporate governance skills and encourage further accredited study.

ORAC conducted a review of its training in September 2005, looking at external evaluations and internal data, as well as an independent impact assessment of the Certificate IV in Business (Governance). The summary of the review is on ORAC’s website at http://www.orac.gov.au/.

Key findings were:

the training has met its original objectives and has performed very well against relevant indicators
the scale of social capital built in communities as a result of the training is far greater than anticipated and will assist communities to engage with government
the training addresses an important need, and the consequence of not addressing this need will be high levels of corporate failure and poor corporate practices which will ultimately undermine efforts to improve Indigenous life outcomes
training has contributed to improved Indigenous governance and management by targeting Indigenous board members and key staff involved with critical sectors (for example, family violence, women’s organisations), highest risk essential service organisations and in high need regions.

ORAC has produced a range of plain English publications and audiovisual materials aimed at making information more accessible to corporations in remote areas. Publications include visual tools and materials targeted toward Indigenous language speakers.

ORAC has also developed materials explaining the new Corporations (Aboriginal and Torres Strait Islander) Bill, including a national Indigenous radio campaign, an information booklet, a DVD, fact sheets and website animation.

Quantity

Number of days of accredited training including Certificate IV in Business (Governance) and diplomas
Target: 150

The Certificate IV in Business (Governance) is offered to directors and members of corporations who have completed the three-day introductory corporate governance workshop. These people are funded by ORAC to undertake the training, although it is increasingly being run through some TAFE and private registered training organisations independent of ORAC.

ORAC fell short of its target of accredited training with:

five and a quarter accredited Certificate IV in Business (Governance) courses delivered over 21 blocks (98 days). The ORAC shift in focus to training in remote communities reduced the outputs because this kind of training takes longer due to cultural and language issues. Also there were changes in participants’ entitlements to cover their costs, so ORAC’s delivery costs were increased. However, ORAC’s excellent retention rate has been maintained
one hundred and forty-five students have completed the course since it was made available three years ago—135 have completed all assessments to the standard required to be awarded the Certificate IV, giving a retention rate of nearly 93 per cent.

Quantity

Number of examinations or reviews conducted
Target: 50.

Corporations that should be compliant under the ACA Act were targeted for regulation such as formal follow-up and examination.

In 2005–06 ORAC initiated 49 examinations of corporations, almost meeting the target of 50. Corporations for examination were selected in response to evidenced problems or as part of a program of rolling examinations responding to risk analysis involving criteria such as size, purpose, time since last examination, compliance status and history of member or other complaints. At June 2006:

10 (20 per cent) of the 49 examinations are operating well and require no further action
10 (20 per cent) of examinations remain under consideration for further action
19 (39 per cent) of the examinations initiated this year, plus a further 15 carried over from 2004–05, required rectification of less serious matters, involving the issue of a section 60A notice under the ACA Act
six (12 per cent) of this year’s examinations, plus a further five carried over from 2004–05, raised serious matters and have been required to advise why an administrator should not be appointed, involving the issue of a section 71 notice under the ACA Act. Of these 11, 10 administrators were appointed and one section 60A notice was subsequently issued
four corporations required a liquidator to be appointed
nine administrations continued from previous years, a total of 14 were appointed and one cancelled in 2005–06, making 22 administrations in progress at 30 June 2006, the highest in ORAC’s history.

The trend for high numbers of examinations shows ORAC is an active regulator. Examinations initiated, administrations appointed and deregistrations completed are shown in table 2.53.

Table 2.53 | Number of examinations initiated, administrations appointed and deregistrations completed 2002–03 to 2005–06
Regulatory actions	2002-03	2003-04	2004-05	2005-06
Examinations initiated	35	54	61	49
New administrations appointed	8	7	7	14
Deregistrations completed	116	282	269	180
Reinstatements				12

Quality

Percentage of corporations compliant with reporting requirements under the Aboriginal Councils and Associations Act 1976
Target: 55 per cent.

Under the ACA Act all corporations are required to submit certain documents to ORAC which are placed on the public register, including a list of members and financial reports, unless the corporation is exempted by the registrar.

Approximately 46 per cent of corporations have provided the three key reports (audit report, balance sheet and income and expenditure) required under the ACA Act for 2004–05 or have been exempted due to their size. While this does not meet the PBS estimate, it is the highest compliance result ORAC has ever had. Compliance with reporting is set out in figure 2.16 and table 2.54.

Figure 2.16 | Compliance of corporations, by number of corporations, 1999–00 to 2004–05

Note: Fully or partially compliant means that either five or three key annual return documents respectively have been provided by the corporation for the relevant two consecutive year period. The above figure shows all returns received by ORAC as at 30 June 2006. Corporations are not required to provide annual returns for 2005–06 until 31 December 2006.

Table 2.54 | Compliance trend 1999–00 to 2004–05
Compliance period	(a) No. of corporations	Fully compliant	Partially compliant	(b) Not fully or partially compliant	% Fully compliant	% Partially compliant	% Not fully or partially compliant
1999–00 to 2000–01	2,490	739	195	1,727	30	8	69
2000–01 to 2001–02	2,497	576	26	1,895	23	1	76
2001–02 to 2002–03	2,308	528	264	1,516	23	11	66
2002–03 to 2003–04	2,259	564	270	1,425	25	12	63
2003–04 to 2004–05	2,543	741	429	1,373	29	17	54

Many more corporations are now obtaining exemptions from some reporting requirements in recognition of their lack of capacity to report—that is, if they are not funded then they are not normally required to provide an audited financial statement and ORAC will usually grant an exemption.

Although most corporations (54 per cent) remain non-compliant with reporting requirements under the ACA Act, compliance improved in 2005–06 by 6 per cent. This improvement is a result of ORAC analysing non-compliance and implementing a plan for appropriate follow-up. Many of the non-compliant corporations are not funded at all, hold land only and may have no capacity to apply for even an exemption. The new Corporations (Aboriginal and Torres Strait Islander) Bill 2005 will enable more streamlined exemptions for some reporting—that is, exemptions for audited financial statements when warranted.

Because of its productive relationships with funding bodies ORAC has been able to establish which corporations are technically non-compliant but have in fact submitted reports required under the ACA Act to funding bodies and are operating well. Corporations that should be compliant under the ACA Act were targeted for regulation such as formal follow-up and examination. Non-compliant corporations that are no longer operating were deregistered.

Quality

Level of satisfaction with responses to Ministerial correspondence
ORAC’s response to Ministerial correspondence is generally very prompt and comprehensive. ORAC has also supported the Minister in the development of the Corporations (Aboriginal and Torres Strait Islander) Bill and the Corporations (Aboriginal and Torres Strait Islander) Miscellaneous and Transitionals Bill.

Page updated: 02 Feb 07